Unpacking Interunit Knowledge Transfer in Multinational Enterprises

We examine the success of knowledge transfer within an MNE network by unpacking aggregate knowledge flows into individual projects. We assess knowledge transfer performance along two dimensions: utilization of transferred knowledge and transfer cost. We argue that the substitutive versus complementary nature of subunits' activities is a key determinant of knowledge utilization at the target subunit. Further, we posit that headquarters' incentives and monitoring are crucial factors affecting both the utilization and transfer cost dimensions. Our empirical results, based on 141 individual intersubunit knowledge transfer projects involving 49 subunits in 12 E uropean countries largely support our arguments. Our methodology highlights the fact that aggregate measures of interunit knowledge flows can be misleading since they may include individual projects with widely differing levels of success.